Beware The Wolf

Bernard Madoff – former chairman of the NASDAQ stock exchange, ‘made off’ with approximately USD65 billion of unsuspecting victims’ hard earned money before being sentenced to a 150-year jail term for his crimes. While some may find comfort in the fact that he will be kept behind bars, nothing can fully remedy the financial loss suffered by those who fell victim to his empty promises.


Reviewing all the elements of the Madoff scandal would require lengthy discussion and may be rather sophisticated for some. However, it makes sense for us to at least know what Ponzi schemes are all about.

“Ponzi” scheme can be summed up as a scheme designed to convince investors to put their money in a fraudulent investment that the schemer eventually runs off with. People often get duped into investing because they are promised a rate of return that is above those they would normally expect with a legitimate investment, and trust the person behind the scheme without much thought. Plenty can be said about Ponzi schemes that have prevailed in the US over the years, but looking at the Malaysian context, we too need to keep a watchful eye on potential “Ponzi” schemes lurking among us.

If any of the following explanations or promises sound familiar to you, then, it is very likely that you have had a brush with scams:

For every investment that you make, you will receive a high return, for instance, 20-30% per month, every month.

bernard-madoff 2

  1. You are not shown the so-called quality product you are allegedly selling, but you will get paid for every person you recruit or sign up.
  1. You are told that the offer is for a limited time and that you MUST invest today.
  1. You are told to send some money to foreign banks in foreign currency to claim a prize but you do not remember entering any contest or lucky draws.
  1. You receive unsolicited phone calls offering investment opportunities and you have no idea how the company has obtained your phone number.
  1. You are offered an investment product that guarantees large profits with no risk.
  1. You are asked to invest in an investment scheme but the address and contact information of the investment company offering you big money is located in a foreign bank where you cannot verify its physical location and cannot find information about the company’s license.


  1. You are approached by someone who claims to be an agent for foreign trading houses (e.g: based in Macau, Bahamas,  British Virgin islands etc) to trade in foreign indices (e.g. Hang Selig index), commodities (e.g. coffee) or forex (e.g. USS, Yen etc) but you need to deposit some money as a “margin” in some sign currency before a trade can be executed.

If you are face with any of the above situation, keep the following points in mind so as to avoid being swindled :

Protection #1:

Avoid any investment guarantees regular or large profits. Be extremely wary of companies that guarantee large profits or promise high return over a short period of time. You must remember that every investment involves risks and you must have often heard:  “high risk, high return!” Be extra careful, especially if the investment is posed to give you high returns with minimal or no risk.

Protection #2:

Be wary of plans that focus on paying you to recruit others-stead of paying you to sell products and services. Key words that should caution you are “down-line” or “pyramid”.

Protection #3:

Never sign up for an opportunity in a high-pressured situation, as “you have a limited time to join and buy now or miss out”. Remember, if it is a legitimate business, it will still be around tomorrow, next week, next month or next year.

Cuffs and money [iStock_2164025]

Protection #4:

It is unlikely for you to win a prize or big money if you have not entered into any contest or lottery. It is also highly unlikely for legitimate contests to ask you for money in advance to claim your prize. If you receive a call that says you have won a prize and you need to send some money to a foreign country in order to claim it, just hang up. It is not worth your time and effort to entertain such calls.

Protection #5:

Be skeptical about unsolicited phone calls regarding investments from foreign salespersons or companies in which you are unfamiliar with. The caller may say that he/she is a stock broking company’s representative or an investment adviser from abroad. If this happens, ask for his/her company’s details.

Request for the name of the foreign regulator that governs his/her company; check the foreign regulator’s website for the list of licensed or registered persons. Must always check the credentials of the persons you are dealing with, with the relevant authority before parting with your money.

Protection #6:

Be sure you get the company’s performance track record. Also ask for written information on the investment product and the business, as well as the risks involved the investment. Read the company’s prospectus and annual report thoroughly before investing.



Protection #7:

Do not provide any financial or personal information before you establish that the company is legitimate. Do not be afraid to ask questions; the more you ask the better! Always demand an explanation for something you do not understand. If in doubt, do not invest. Make sure you obtain solid information about the investment, the company and the salespersons/agents.

Protection #8:

Always check against the regulator’s website, for example, the Securities Commission Malaysia (SC) website ( for information on investor’s alerts, or the list of licensed intermediary companies etc before investing.

Finally, equip yourself with financial and investment knowledge so that you are protected from investment scams. Always remember, “Not all that glitters is gold!”

Beware The Wolf
Rate this post